Intrday Market Analysis: AUDUSD and the US Geopolitical Tension

AUDUSD Technical Analysis

The Australian Dollar (AUD) came under pressure in recent weeks. Despite some positive economic data from China AUD was unable to correct higher. Even the geopolitical tension in the US was unable to reflect in AUDUSD as opposed to other USD currency pairs such as EURUSD. The Reserve Bank of Australia (RBA) is unlikely to alter its monetary policy until the Fed determines whether it wishes to hike rates in June in light of the recent political tension.

Fed Bullard questioned the need for further rate hikes beyond June, which may continue to pressure the US Dollar in the Forex market.

AUDUSD 4hr Chart

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AUDUSD 4hr Chart 20/05/17

AUDUSD Intraday Strategy I

The 4hr chart displays a mutated form of reversed H&S. A break above the upper resistance (neckline) is required to affirm further gains in the pair. The lower support line may not be as firm as the resistance although if it is successfully tested by the market corrective gains may materialize. An hourly may be required to play a buy-on-dips strategy in AUDUSD. Once the neckline is breached AUDUSD may target 0.7520.

The 100% objective of the reversal following the breakout is 0.7545, however, there may be a struggle around 0.7520. The longer-term outlook for AUDUSD may not be as a bright as the intraday projection. Moderate gains are required to negate the longer term outlook for the pair. The heavy selling in Iron Ore forced AUD lower. A significant rebound is required in Iron Ore prices in order to trigger fresh round of gains in AUD pairs and crosses.

AUDUSD 60min Chart

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AUDUSD 60min Chart 20/05/17

AUDUSD Intraday Strategy II

AUDUSD hourly chart displays the tight range in the pair, 0.7410 – 0.7466. 0.7435 may provide some comfort if tested by the market following an hourly close. An attempt to re-test 0.7466 may then be made. The 200 Moving Average (MA, in purple) may continue rising, which may act as a fairly strong support in the near future as it was already successfully tested by the market.

As the RBA already affirmed it is unwilling to slash rates, the key fundamental trigger is some relief from the current risk aversion mode. As this is an intrday trading strategy RBA Debelle speech at the beginning of the week may trigger some volatility in AUD pairs and crosses although the US tension and Iron Ore prices may have a greater impact on the currency.

We would like to clarify that the intraday strategy is restricted to AUDUSD. As OPEC is now considering a larger output cut the Canadian Dollar may continue to strengthen against the Aussie. GBP may be more driven by the upcoming general elections in the UK and the brexit negotiations, both are schedule to commence in June, 2017.

22/05/17 UPDATE: AUDUSD has been trading between 0.7435 – 0.7466 at the time of this writing.

Please click on the chart to enlarge:

AUDUSD 60min Chart 22/05/17

The upper intraday resistance is being tested, a break above may pave the way for stronger gains in the currency pair.

23/05/17 UPDATE: AUDUSD was able to take 0.7466, followed by a successful re-test:

AUDUSD 60min Chart 23/05/17

28/05/17 UPDATE: AUDUSD was unable to maintain its uptrend following the breakout, paying no attention to the daily neckline of the reversed H&S.

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